The Six Degrees of Mobile Data Plan Innovation

COPYRIGHT © 2014 ALCATEL-LUCENT. ALL RIGHTS RESERVED.

THE SIX DEGREES OF MOBILE DATA PLAN INNOVATION Rich Crowe September 2014

2


AGENDA

1. Market realities

2. Why typical mobile data pricing models are insufficient

3. Address business objectives through data plan innovation

4. The six degrees of mobile data plan innovation - Application-based - Shared data - Service level-based - Third party pays - Capacity-based - Loyalty-based

5. Why Alcatel-Lucent for mobile data plan innovation?

3


TRAFFIC IS INCREASING…BUT REVENUES ARE DECLINING

Sources: Revenue: Mobile Regional and Country Forecast: 2013–18, Ovum, August 2013 Data Traffic: Cisco VNI, May 2013

GLOBAL MOBILE DATA TRAFFIC VERSUS ARPU

Voice revenue

Messaging and data revenue

Total revenue

Data traffic

New subscriber numbers have flatlined

$14

$12

$10

$8

$6

$4

$2

$0

Mon

thly

dat

a tr

affi

c (E

xaby

tes)

12

10

8

6

4

2

0

2012 2013 2014 2015 2016 2017

4


NEW COMPETITIVE DYNAMICS HAVE ACCELERATED THIS REALITY

5


WHILE DATA TRAFFIC RISES… DATA PRICING FALLS

Source: North American Tier 1 published prices; Voice and messaging plans extra; 2013: Voice and messaging included; line charge extra

51x MORE DATA

Price per Megabyte

2013

2003

-98.4%

UP TO 140x FASTER

INCLUDES VOICE AND MESSAGING MUCH MORE USEFUL

6


CURRENT MOBILE DATA PRICING MODELS ARE INSUFFICIENT

Unlimited data plans are generally seen as unsustainable… But tiered data plans DRIVE COMMODITIZATION AND create customer dissatisfaction

Source: Wireless Nomad PMR, January 2013

Reasons for dissatisfaction (UK)

Reasons for dissatisfaction with price (UK)

39% 52%

9%

I often exceed the limit and then overage charges are incurred

I use less data then the monthly allowance and therefore feel that the service is too expensive

Others

Price

Overall Performance

Coverage

Roaming Charges

Overage Charges

Other

85%

62%

59%

51%

33%

10%

7


FLIP YOUR BUSINESS MODEL TO A DATA-CENTRIC ONE

APPLICATION-BASED

SHARED DATA

SERVICE LEVEL-BASED

THIRD PARTY PAYS

CAPACITY-BASED

LOYALTY-BASED DATA

CENTRIC SIX DEGREES OF

MOBILE DATA PLAN

INNOVATION

VOICE IS NOW PART OF DATA VOICE

CENTRIC Text

Data Voice

8


ADDRESS BUSINESS OBJECTIVES THROUGH DATA PLAN INNOVATION

Business objectives (illustrative)

Increase data usage

Grow revenue

Attract subs and devices

Create new

mobile data users

Create new

business models

Reduce churn

Manage yield

Deg

ree

of In

nova

tion

Application-based X X X X

Shared Data X X X X X

Service Level-based X X

Loyalty-based X X X

Third Party Pays X X X

Capacity-based X X

9


Free service for 1st month and €7.95/month thereafter

6 TV channels

Introduction coincided with FIFA World Cup to incent 4G use, subscriptions

Data usage does not count against subscriber data plans

APPLICATION-BASED PLAN INNOVATION EXAMPLE: VODAFONE NETHERLANDS 4G TV

INNOVATION:

MOBILE 4G TV SERVICE THAT DOES NOT COUNT AGAINST SUBSCRIBERS’ DATA PLANS

Application-based

10


Price certainty improves uptake and customer satisfaction

Differentiate top tier data plans by bundling applications

Attract new mobile data subscribers and retain existing subscribers

Requires relationships with application providers

THOUGHTS ON APPLICATION-BASED PLANS

Source: Avvasi, Inc.

NO LONGER A TOOL PRIMARILY FOR DEVELOPING DATA USAGE IN EMERGING MARKETS: HIGH-END BUNDLES, YOUTH MARKET, MARKETING TOOL, ADDRESS OTT COMPETITION

Application-based

11


SHARED DATA PLAN INNOVATION EXAMPLE: VERIZON WIRELESS SHARE EVERYTHING PLAN

Shared data

23% of Postpaid accounts on shared plans in 5 months

12% increase in smartphone penetration in 1 year

>8% service revenue growth every quarter

Growth in ARPA every quarter

1ST YEAR RESULTS

INNOVATION:

MULTIPLE DEVICES AND SUBSCRIBERS SHARE A

COMMON POOL OF DATA AND GAIN UNLIMITED

VOICE AND MESSAGING

12


THOUGHTS ON SHARED DATA PLANS HIGH LIKELIHOOD OF PURCHASE AMONG THOSE INTERESTED

LIKELIHOOD OF PURCHASE AMONG THOSE INTERESTED

INTEREST IN SHARED DATA PLANS

Dat

a on

ly

Ever

ythi

ng

Shared data

19 OF THE 25 LARGEST MOBILE SERVICE PROVIDERS BY SUBSCRIBERS OFFER SOME FORM OF DATA SHARING.

80%

60%

40%

20%

0% Brazil France Japan UK US

Data only Everything

Brazil France Japan UK US

100%

80%

60%

40%

20%

0%


100%

80%

60%

40%

20%

0%

Very likely Likely Unlikely

13


THOUGHTS ON SHARED DATA PLANS A TOOL FOR ATTRACTING AND RETAINING SUBSCRIBERS

NEW WAYS TO SHARE ARE EMERGING: SHARED APPS, SHARE STORAGE, DATA GIFTING/EXCHANGES.

Shared data


100%

80%

60%

40%

20%

0%

Definitely Likely Unlikely

CHURN IMPACT AMONG THOSE INTERESTED


100%

80%

60%

40%

20%

0%

Very strong Strong Weak

RETENTION IMPACT AMONG THOSE INTERESTED

14


Offer priority for 4G data even when the network is congested

Only available to SmartSurf postpaid subscribers

Free on Premium plans; free for 2 years on Value and Plus plans

Allocates up to 25% more resources to SmartSurf subscribers connecting to StarHub’s 4G network

INNOVATION: INTRODUCE A PREMIUM LEVEL OF SERVICE TO

INCENT SUBSCRIBERS ONTO TOP POSTPAID PLANS

SERVICE LEVEL-BASED PLAN INNOVATION: EXAMPLE: STARHUB 4G SMARTACCESS

Service level-based

15


THOUGHTS ON SERVICE LEVEL-BASED PLANS

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Brazil

France

Japan

UAE

UK

USA

Which of these quality of service enhancements appeal to you most?

Premium Subscription Turbo Boost App Boost None Of Them

THE OPTIMUM PRICE POINT IS

USD $10/MONTH FOR A PREMIUM SUBSCRIPTION

Service level-based

ALCATEL-LUCENT RESEARCH SHOWS SUBSCRIBERS ARE INTERESTED IN SERVICE LEVEL-BASED PLANS

16


THIRD-PARTY PAYS PLAN INNOVATION EXAMPLE: AT&T SPONSORED DATA

Subscribers can browse, stream and use apps from data sponsors without impacting their monthly data plan

Keeps the data flowing and creates new revenue for operators and sponsors

INNOVATION:

COMPANIES PAY FOR THE DATA CONSUMED

BY SPECIFIC CONTENT

Third party pays

AQUTO, KONY, UNITED HEALTHCARE, SYNTONIC

17


THOUGHTS ON THIRD-PARTY PAYS PLANS MANY VARIATIONS ARE POSSIBLE, BUT ISSUES ABOUND

• Will it be economically viable for application providers to sponsor large quantities of data?

• Net neutrality and SLAs.

• Ensuring a fair playing field for smaller players.

• Service providers may be seen as “double dipping”.

SPONSORED DATA

Third party pays

INEVITABLE WITH RAPIDLY GROWING MOBILE DATA CONSUMPTION?

Unlimited

Enterprise

Subscription Limited by device/account

Limited by total consumption

18


LOYALTY-BASED PLAN INNOVATION EXAMPLE: DST BRUNEI LOYALTY CARD AND REWARDS

Drive desired customer behavior

Big Spender Rewards Top-Up bonuses and awards Account activation awards Encouraging International (IDD) Weekend Calling Encouraging International SMS Messages Birthday Awards

INNOVATION:

LOYALTY CARD AND PROMOTIONAL DISCOUNTS

THROUGH RETAIL PARTNERS

Loyalty-based

NEXT INNOVATION: REWARDING SUBSCRIBERS WITH MOBILE DATA?

19


THOUGHTS ON LOYALTY-BASED PLANS MOBILE DATA AS A REWARD Percent of respondents that agree and strongly agree with these statements regarding mobile rewards.

France Japan United Kingdom

United States

This mobile data service option is new and different from others available today 38% 32% 44% 57%

I would be very interested to subscribe to this mobile data service option 30% 34% 26% 38%

This mobile data service option is relevant to my needs 29% 30% 27% 40%

This mobile data service option is exciting 35% 33% 32% 41%

I would clearly know what to expect from this mobile data service option 38% 27% 38% 41%

Loyalty-based

Source: Alcatel-Lucent Wireless Nomad Primary Market Research, January 2013

20


1GB for anytime use + 1GB to use between 1 a.m. and 6 a.m.

Overnight GB discounted almost 75%

Target heavy internet users and the younger/student market segment

For LTE, more useful to target price sensitive segments without undermining standard prices

CAPACITY-BASED PLAN INNOVATION EXAMPLE: ROBI 2GB PLAN

INNOVATION:

A TIME OF DAY-BASED DISCOUNTED MOBILE DATA OFFER TO TARGET MARKET

SEGMENTS AND CREATE OFF-PEAK DEMAND

Capacity-based

21


THOUGHTS ON CAPACITY-BASED PLANS

Approach Business objectives Marketing objectives

Reduce peak traffic

Sell unused capacity

Monetize congestion

Increase customer perceived value add

Generate new revenue

Enhance service delivery

Target segment

Shift existing traffic to off peak X X X Budget-conscious

subscribers

Create services to consume off-peak capacity

X X X X Bulk data users

Monetize peak traffic X X X X High-value subscribers

Capacity-based

22


WHY ALCATEL-LUCENT FOR MOBILE DATA PLAN INNOVATION?

Products, services and solutions to:

• Enhance your value proposition

• Improve your customer relationship

• Leverage new selling channels

5780 Dynamic Services

Controller

Smart Plan Builder SurePay

Wireless Network Guardian

7750 Service Router (DPI)

Consulting Services

For more information or a copy of our e-book, please visit us!

http://next-generation-communications.tmcnet.com/ebook-blast/alu-six-degrees-ebook.html�

Technology

The Six Degrees of Mobile Data Plan Innovation